representing wellington management - granicus
TRANSCRIPT
Representing Wellington Management
Commodities
Wellington Management Company, llp
Imperial County Employees’ Retirement System (ICERS)
16 January 2013
Rich HoffmanVice PresidentInvestment Director
Scott Geary, CFAVice PresidentBusiness Development Manager
2000459761/331195_0/331195/G1298
Appendix
Agenda
Section One
2000455210/331195_0/329782/320793
Wellington Management Company Overview
Section Two Commodities
Section Three Appendix
W E L L I N G T O N M A N A G E M E N T
1
Appendix
Wellington ManagementUnique Organization & Stable Partner
*Total partners as of 1 January 2013
2000460249/331195_0/331195/262360
Business Model
Investment management only
Globally diversified
Institutional focus
Interests aligned with clients
Ownership Model
Founded in 1928Private partnership• Independent: no public
shareholders, no outside capital
• 135 partners*, all active at the firm
• Long-term oriented, investing ahead of the curve
Empowered portfolio teams
Marketplace of ideas
Freedom to disagree
Career Analysts
Global Resources
Performance driven with highest ethical standards
Client first Collaboration core to investment process
Investment Model
Culture
1
Appendix
Experienced Investors Who Value Independent Research
We have seasoned investment talent…
2000415106/331195_0/319929/G1039
and low turnover
Total as of 30 June 2012
Average Years of Experience
5-Year Average Annual Turnover1
Portfolio Managers 119 207%
Research Analysts 220 16
Total Investment Professionals 536 17
We believe in the value of in-depth, hands-on research
2011
Company Meetings2 10,000+
Stocks Researched3 3,500+
Fixed Income Ratings Assigned4 4,000+
1Turnover data as of 31 December 2011; applies to research analysts and equity and fixed income portfolio managers. | 2Total number of company meetings across equity, fixed income, and global industry analysts. | 3Stock coverage by global industry analysts. | 4Proprietary ratings assigned to bond obligors, issuers, or issues.
2
Appendix
Research PortfoliosA Geographically Diverse, Interconnected Investment Team
2000002393/331195_0/G1249/G1249
London – 58 Investment Professionals
Global Industry Research5 Global Industry Analysts1 Global Industry Research Associate
Global Equity Portfolio Management6 Portfolio Managers3 Research Analysts
Fixed Income Portfolio Management11 Portfolio Managers9 Credit Analysts/Portfolio Analysts1 Quantitative Analyst
Asset Allocation1 Portfolio Manager2 Analysts
Additional Resources4 Global Traders1 Portfolio Coordinator8 Investment Directors/Portfolio Specialists3 Generalist Research Associates3 Investment Professional Management
United States – 436 Investment Professionals
Global Industry Research38 Global Industry Analysts10 Global Industry Research Associates
Global Equity Portfolio Management45 Portfolio Managers55 Research Analysts/Research Associates
Investment Research9 Macroanalysts/Research Associates9 Quantitative Analysts (Equity)3 Technical Analysts3 Global Derivatives Analysts
Fixed Income Portfolio Management44 Portfolio Managers52 Credit Analysts/Portfolio Analysts/ Research Associates13 Quantitative Analysts
Asset Allocation7 Portfolio Managers14 Analysts
Additional Resources46 Global Traders44 Investment Directors/Portfolio Specialists44 Other Investment Professionals*
Singapore – 20 Investment Professionals
Global Industry Research6 Global Industry Analysts2 Global Industry Research Associates
Global Equity Portfolio Management1 Portfolio Manager3 Research Analysts
Asset Allocation1 Portfolio Manager1 Specialist
Additional Resources1 Portfolio Coordinator2 Investment Directors1 Portfolio Specialist1 Generalist Research Associate1 Investment Professional Management
Sydney – 3 Investment Professionals
2 Investment Directors1 Portfolio Specialist
Tokyo – 9 Investment Professionals
Global Equity Portfolio Management1 Portfolio Manager4 Research Analysts/Research Associates4 Investment Directors/Portfolio Specialists
Hong Kong – 17 Investment Professionals
Global Industry Research3 Global Industry Analysts3 Global Industry Research Associates
Global Equity Portfolio Management1 Portfolio Manager2 Research Analysts
Investment Research3 Macroanalysts/Research Associates
Additional Resources1 Portfolio Coordinator2 Investment Director/Portfolio Specialist1 Generalist Research Associate1 Investment Professional Management
191
58
9
17
20
3
*Includes Professional Management, Portfolio Coordinators, Technical Research Associates, and Generalist Research Associates | 30 September 2012
416
BostonLondon
Tokyo
Hong Kong
Singapore
Sydney
RadnorSan Francisco
3
Appendix
Multi-Asset Expertise Around the World
*Market value of assets managed in Wellington Hedge Management-sponsored hedge funds. Hedge Fund assets are also reflected in the totals above.
2000460241/331195_0/331195/G1039
| Rounded asset totals as of 30 September 2012; central banks and government investment agencies figures as of 31 December 2011; subadvisory client and asset data as of 30 September 2012. | Ranking sources: 2011 Pensions & Investments Databook. Largest insurance companies defined by net assets as of 31 December 2011, as reported by SNL Financial.
Our broad capabilities enable us to provide solutions to•20oftheworld’s50largestretirementplans•14oftheworld’s25largestinsurancecompanies•10ofthe20largestUSfoundations•11ofthe20largestUSendowments•39oftheworld’scentralbanksandgovernmentinvestmentagencies•83subadvisoryclients,representingUS$392billioninassets–makingustheworld’slargestsubadvisorformutualfundsponsorsanddistributors
We align our interests with those of our clientsbylinkingourincentivestructuretoportfolioperformance.
4
W E L L I N G T O N M A N A G E M E N T
2
Appendix
Investment Philosophy
2000348571/331195_0/G2255/G2255
Philosophy Investment Impact
A market of commodities, not a commodity market
Diversify the portfolio through our strategic benchmark and a broad opportunity set
Fundamentals drive prices over the long term Analyze long-term supply, demand, and cost trends utilizing resources across Wellington Management
Short-term events influence price volatility Take advantage of price extremes based on a valuation and contrarian framework
Roll yield impacts total returns Maximize the roll yield through active curve management
Volatility differs across commodities and curves Utilize a contribution-to-risk approach to portfolio construction
5
Appendix
Commodities PortfolioInvestment Objective and Approach
*The Strategic Benchmark is an equal sector-weighted version of the production-weighted S&P Goldman Sachs Commodity Index, where we have weighted four sectors equally: Energy, Precious Metals, Industrial Metals, and Agriculture & Livestock. The Strategic Benchmark’s sector weights are rebalanced quarterly.
2000003471/331195_0/G1298/G1298
| The above characteristics are sought during the portfolio management process. Actual experience may not reflect all of these characteristics, or may be outside of stated ranges.
Investment objectiveSeeks to outperform our strategic benchmark, an equal sector-weighted custom commodities index*
Investment approachFundamental research-based active management•Commodityselection–approximately50commoditiesinopportunityset•Contractselection–maturitiesrangingbetweenonemonthandtenyears•Sectorallocationflexibility
Contribution-to-relative-riskapproachguidesportfoliopositioning
Collateralmanagedtoachievehighqualityandliquidity
6
Appendix
The Commodities MarketBenchmark Characteristics
2000003477/331195_0/G1298/G1298
70%
7%
4%
19%
Energy Industrial Metals Precious Metals Agriculture & Livestock
34%
15%16%
35%
25%
25%25%
25%
*Represents target weights. Actual weights may vary for individual accounts. The Strategic Benchmark is an equal sector-weighted version of the production-weighted S&P Goldman Sachs Commodity Index, where we have weighted four sectors equally: Energy, Precious Metals, Industrial Metals, and Agriculture & Livestock. The Strategic Benchmark’s sector weights are rebalanced quarterly. | **Volatility and correlations are based on the period from 1 January 2001 through 31 December 2011. | Sector weights are as of 31 December 2011. Number of Commodities are as of 1 January 2012. | Sources: S&P, UBS, Bloomberg
S&P Goldman Sachs Commodity Index
Dow Jones UBS Commodity Index
Wellington Management Strategic Benchmark*
Weighting Methodology Production Production and Open Interest Equal Sector
Number of Commodities 24 20 24
Contract Holding Front Month Front and Second Front Month
Correlation with US CPI** 0.7 0.6 0.6
Historical Volatility** 24.5 17.8 16.6
Sharpe Ratio -0.03 0.10 0.35
7
Appendix
Commodities BenchmarksReturn and Volatility Since July 2003*
*Since inception of Wellington Management’s first Commodity Portfolio, 1 July 2003, through 31 December 2011
2000277756/331195_0/G1298/G1298
| **Information shown is for a representative account which was selected by the firm because it was deemed to best represent this investment approach. As the designated representative account may change over time, different accounts may be reflected for the time period shown. Each client account is individually managed; actual holdings will vary for each client and there is no guarantee that a particular client’s account will have the same characteristics as described above. Representative account information is supplemental to the GIPS® compliant presentation for the Commodities Composite which is provided in the attachment. | Gross performance results are net of commissions and other direct expenses, but before (gross of) advisory fees, custody charges, withholding taxes, and other indirect expenses, and include reinvestment of dividends. If all expenses were reflected, the performance shown would be lower. Actual fees will vary depending on, among other things, the applicable fee schedule and account size. For example, if US$100,000 was invested and experienced a 10% annual return compounded monthly for ten years, its ending value, without giving effect to the deduction of advisory fees, would be US$270,704 with an annualized compounded return of 10.47%. If an advisory fee of 0.95% of average net assets per year were deducted monthly for the ten-year period, the annualized compounded return would be 9.43% and the ending dollar value would be US$246,355. Information regarding the firm’s advisory fees is available upon request. Composite returns have the potential to be adjusted until reviewed and finalized 30 days following each calendar quarter end period. Past performance is no guarantee of future results. For use in one-on-one presentations only. This supplemental information complements the GIPS® compliant presentation provided in the attachment.
Realized Roll Yield (%) 2H03 2004 2005 2006 2007 2008 2009 2010 2011
S&P GSCI (Production-Weighted) -0.3% -3.0% -12.7% -19.4% -10.1% -7.1% -25.0% -12.1% -3.4%Dow Jones-UBS Commodities Index -0.6 -4.4 -9.9 -15.6 -11.5 -10.5 -16.3 -10.4 -5.9Strategic Benchmark -0.6 -2.2 -6.0 -10.7 -7.5 -7.2 -13.4 -7.3 -2.8
J
J
JJ
J
J
H
0
2
4
6
8
10
12
14
0 5 10 15 20 25 30
Annu
alize
d Re
turn
(%)
Annualized Volatility (%)
Barclays US Aggregate
MSCI World
Dow Jones UBS Commodities Index Reuters/Jeffries CRB
S&P GSCI (Production-Weighted)
Commodities Portfolio**
Strategic Benchmark
8
Commodities PortfolioA Long Tradition of Managing Natural Resources Portfolios
Appendix
2000003491/331195_0/G1298/G1298
1984
Core Energy
Energy
EnergyHedge Fund
Global Natural
Resources
1987 1988 1995 2003 2010200920051998
NaturalResources
Hedge Fund
CommoditiesGlobal Precious
Metals
Agriculture Equities
Opportunistic Commodities
9
Appendix
Commodities PortfolioUniverse
2000003502/331195_0/G1298/G1298
Benchmark Commodities (Maximum Tenor in Years) Non-Benchmark Commodities
Hig
hly
Liqu
id C
omm
oditi
es
Energy and Power Industrial Metals
Oil (10) •WTI•Brent•LLSGasoline(3)HeatingOil(3)Gasoil (4)
NaturalGas(12)•USNaturalGas(Henry Hub,OtherRegions)•NGLs (Ethane,Propane)•UKNBP
Aluminum(10)Copper(10)Lead(3)Nickel(5)Zinc(5)
Precious Metals Agriculture & Livestock
Gold(5)Silver(5)
Corn(4)•US•EuropeanSoybeans(3)•US•China(Dalian)
Wheat(3)•KansasCityWheat•ChicagoWheat•EuropeanWheat
Less
Liq
uid
Com
mod
ities
Energy and Power Industrial Metals
Cotton(3)Coffee(3)•Arabica•RobustaCocoa (3)Sugar(3)•Domestic•WorldCattle(1)LeanHogs(1)
Coal (4)•US(CentralApp,PRB)•Seaborne(API#2and#4,Newcastle)Power–On-PeakandOff-Peak(5)•US(PJM,ERCOT,CINERGY)Ethanol(3)
IronOre(2)Uranium(3)Alumina(OTC)Tin(1)
Precious Metals Agriculture & Livestock
Palladium(1)Platinum(1)
SoybeanOil(3)SoybeanMeal(3)OrangeJuice(3)Lumber(1)CanolaOil(2)PalmOil(2)
Barley(2)Oats(3)Rapeseed(1)Rice(1)Rubber(1)
Other
CO2Emissions(5)•EUAs•CERs•DOEUS
DryBulkFreight(4)•Capesize•Panamax•Handymax
TankerRates(3)•Dirtytankers(crude)•Cleantankers(products)
10
Appendix
Commodities PortfolioCommodities Team Leverages Broader Firm Resources
* Years experience for groups are averages.
2000407541/331195_0/G1298/G1298
| As of 1 December 2012
TitleYrs of Prof Exp
Yrs of Firm Exp
Portfolio Managers David A. Chang, CFAGregory J. LeBlanc, CFA
Portfolio Manager, CommoditiesPortfolio Manager , Commodities
1120
1117
Agriculture & Livestock David R. Fassnacht, CFAGreg GarabedianGabriel A. Kim, CFASabre S. Mayhugh
Portfolio Manager, Global AgricultureEquity Research AnalystEquity Research AnalystCommodities Research Analyst
24131519
21658
Energy Karl E. BandtelJay BhutaniVictor Cherian, CFAEugene KhmelnikBill OgrodnickMark N. Viviano, CFAGeorge A. von Metzsch
Portfolio Manager, Natural ResourcesGlobal Industry AnalystGlobal Industry AnalystEquity Research AnalystGlobal Industry AnalystGlobal Industry AnalystResearch Analyst
2225144
1013
3
225145
101
Industrial & Precious Metals Andrew ChangJohn C. O’Toole, CFAManuel R. SotoKeith E. White
Global Industry AnalystPortfolio Manager, Natural ResourcesResearch AssociateGlobal Industry Analyst
624
410
220
45
Power, Consumer,Chemicals & Industrials
Mark J. BeckwithAlan HsuTom LeveringJuanJuan Shen, CFARobert F. Hayes, III, CFAChris AveryWilliam L. Wrightson, III, CFASuzanne L. Stefany
Global Industry AnalystGlobal Industry AnalystGlobal Industry AnalystGlobal Industry AnalystGlobal Industry AnalystGlobal Industry AnalystGlobal Industry AnalystGlobal Industry Analyst
3211191717312224
174
126
124
1410
Other Resources 33 Asset Allocation Strategists5 Currency StrategistsGlobal Industry Analysts7 Macroanalysts3 Technical Analysts
16*22*18*20*24*
Trading Derek W. FallonStephen Langone, CFAMark J. MarescoChristopher M. Mylod, CFA46 Other Traders
Equity TraderEquity TraderEquity TraderManager, Glob Programs & Derivatives
1416321819
4111814
Product Management Richard HoffmanWilliam SamuelsAndrea AnastasioJoy Perry
Investment DirectorPortfolio AdvisorInvestment DirectorEquity Portfolio Specialist
1536136
116
121
11
Appendix
Fundamental Analysis at Wellington Management: The Oil Mosaic
2000451506/331195_0/G1298/G1298
Oil
Pipelines
Rail
Tankers
WTI – Brent Spread
Transports
Industrials
Utilities
Natural Gas
Coal
Renewable Fuels
Corn
Integrated Oil Producers
Exploration and Production
Companies
Oil Service Companies
Time Spreads
Refiners
Chemical Companies
Storage
Gasoline and Distillate
Crack SpreadsOil vs Gas
Oil Transport Oil Consumption Alternative Energy SourcesOil Production Oil Conversion
and Storage
Oil Supply Chain Industries Commodity Investment Implications
12
Appendix
Commodities PortfolioInvestment Process and Portfolio Construction
2000003499/331195_0/G1298/G1298
Portfolio
Instrument •Cost•Liquidity
•Contribution-to-RiskAnalysis•DiversifiedExposures
Curve
Sentiment
•RollYield•Seasonality•Volatility
Fundamentals•Supply/DemandBalance•CapacityUtilization•InventoryLevels
•MarketPositioning•OptionVolatility
Valuation•ProductionCostCurve•DemandSensitivity•RelativeCommodityValuations
13
For illustrative purposes only. Not representative of an actual investment. The chart is a conceptual representation of how Wellington Management views its investment focus for commodities management.
Appendix
Commodities PortfolioIntermediate and Long-Term Investment Focus and Research
2000410689/331195_0/G1298/G1298
0 – 1 Year
Investment Horizon
1 – 5 Year 5 – 30 Year
Focus of Investment Research
InventoriesSupply ShocksWeatherSentimentLiquidityGeographical RiskNatural DisastersPhysical ArbitrageTrade
SubstitutionMarginal CostsCapital ExpenditureNew ProjectsResource OwnershipDemand ResponseGDP Growth
DemographicsIncome GrowthUrbanizationTechnologyPolicy
B Market FocusB Wellington Management Focus
14
Appendix
Commodities PortfolioInvestment Guidelines
*Net exposure is defined as the sum of all long positions in a specific commodity minus the absolute value of all short positions in the same commodity.
2000003516/331195_0/G1298/G1298
| The portfolio may have short exposure to specific commodity-contracts, for example. However, this short exposure would be offset by equal or greater long exposure to other contracts for the same commodity. Net exposure of all contracts for a given commodity cannot be less than zero. | The above characteristics are sought during the portfolio management process. Actual experience may not reflect all of these characteristics, or may be outside of stated ranges.
Individual commodities*•Instruments:futures,options,swaps,andETFs•Netexposure:0%to30%,or10%inexcessofthebenchmarkweight•Grossexposure:0%to60%•Out-of-benchmarkpositionspermitted
Sectors•±15%relativetobenchmark
Aggregateportfolio•Netexposure:90%to100%•Grossexposure:90%to200%(150%longversus50%short)•Fullycollateralized
15
Commodities PortfolioRisk Management
Appendix
2000003523/331195_0/G1298/G1298
Investment Risks Operational RisksPortfolio and Product Management•Proprietaryriskmodel•Contribution-to-riskapproach•Modelingoffullfuturescurve•Seasonaladjustment•Stresstesting –Correlationshocks –Historicalevents –Economicandfundamentalvariables
Trading•Liquidity•Speculativelimits•Derivativerolls
CounterpartyReviewGroup(OTCInstruments)•Approvedcounterparties•MasterISDAs•Collateralmargining
InvestmentReviewGroup•Reviewsthequalityofportfoliomanagementserviceswithrespecttothephilosophy,process,andprinciplesofthemandate
Compliance•Portfolioguidelines•Total,sector,andcommodityexposures
16
As of November 2012
Appendix
Outlook for CommoditiesCurrent Focus
Individual commodity markets influenced by independent drivers.
2000431994/331195_0/G2255/G2255
Short-Term Medium-Term
Oil Iran, SPR and OPEC North American liquids production
Natural Gas Rig activity and shale productivity
New sources of demand
Base Metals China stimulus Chinese economic rebalancing
Gold Quantitative Easing Monetary debasement
Platinum Group Metals South African unrest Capex reductions
Grains Demand destruction Supply response
Livestock Herd liquidation Herd rebuilding
17
2000459760/331195_0/331195/G1966
< 1Mo
1 – 2Mos
2 – 3Mos
3 – 6Mos
6 – 12Mos
12 – 24Mos
24 – 36Mos
> 36Mos**
-10
0
10
20
30
40
50
Perc
ent
Portfolio Benchmark
Platinum Corn Zinc Lean Hogs Live Cattle Aluminum-6
-4
-2
0
2
4
6
Perc
ent
Relative Weight Beta-Adjusted Weight
Appendix
Commodities PortfolioPositioning as of 30 November 2012
*Based on relative exposure. | **Includes exposure via ETFs and commodity holding companies. | “Relative Weight” is based on net market exposure. “Beta-Adjusted Weight” is a risk-adjusted metric reflecting the portfolio’s sensitivity to a commodity’s price movement. | As of 30 November 2012
Percent of Portfolio by Months to Maturity
Strategic Portfolio Benchmark Weights Weights
Total 100.0% 100.0%Energy 23.7 25.1Industrial Metals 23.9 25.1Precious Metals 28.0 24.8Agriculture & Livestock 22.9 25.0Cash 1.6
Strategic Portfolio Benchmark
Roll Yield -1.3% -1.7%Gross Exposure 117.8% 100.0Net Exposure 98.4 100.0Gross Long 108.1 100.0Gross Short -9.7 0.0Average Maturity 1.7 mos 2.0 mosProjected Tracking Risk 2.05 Projected Beta 1.00 Percent Futures 71.8% Percent Options 1.3 Percent Swaps 22.5 Percent ETFs 2.8
Largest Active Commodities Positions*Sector Positioning
Portfolio Characteristics
18
Appendix
Commodities CompositeInvestment Returns (US$) Through 30 November 2012
*The Strategic Benchmark is an equal sector-weighted version of the production weighted S&P Goldman Sachs Commodity Index, where we have weighted four sectors equally: Energy, Precious Metals, Industrial Metals, and Agriculture & Livestock.
2000460527/331195_0/331195/G1298
| Inception date of the composite is 31 December 2007. | Performance returns for periods less than one year are not annualized. | Gross performance results are net of commissions and other direct expenses, but before (gross of) advisory fees, custody charges, withholding taxes, and other indirect expenses, and include reinvestment of dividends. If all expenses were reflected, the performance shown would be lower. Actual fees will vary depending on, among other things, the applicable fee schedule and account size. For example, if US$100,000 was invested and experienced a 10% annual return compounded monthly for ten years, its ending value, without giving effect to the deduction of advisory fees, would be US$270,704 with an annualized compounded return of 10.47%. If an advisory fee of 0.95% of average net assets per year were deducted monthly for the ten-year period, the annualized compounded return would be 9.43% and the ending dollar value would be US$246,355. Information regarding the firm’s advisory fees is available upon request. Composite returns have the potential to be adjusted until reviewed and finalized 30 days following each calendar quarter end period. Past performance is no guarantee of future results. For use in one-on-one presentations only. This supplemental information complements the GIPS® compliant presentation provided in the attachment.
Annualized Returns Since 1 Yr 3 Yrs Inception Commodities Composite 0.8% 7.7% 4.0%Strategic Benchmark* 0.7 6.3 1.2Production-Weighted S&P GSCI -1.4 3.1 -8.1Dow Jones – UBS Commodity Index -2.2 1.6 -4.7
YTD 2011 2010 2009 2008 Commodities Composite 5.1% -4.0% 22.8% 33.9% -27.1%Strategic Benchmark* 4.9 -5.7 21.3 27.9 -31.0Production-Weighted S&P GSCI 0.7 -1.2 9.0 13.5 -46.5Dow Jones – UBS Commodity Index 1.6 -13.3 16.8 18.9 -35.6
19
Appendix
Commodity Attribution Summary – Calendar YearsAs of 31 December 2011
2000003552/331195_0/G1298/G1298
Since 2011 2010 2009 2008 2007 2006 2005 2004 2003* Inception** ––––––––––––––––– ––––––––––––––––– ––––––––––––––– ––––––––––––––––– ––––––––––––––––– –––––––––––––– ––––––––––––––––– ––––––––––––––––– ––––––––––––––––– ––––––––––––––––––––––––––––––
Total Impact from Commodities Decisions 1.4% 1.6% 5.3% 3.5% 1.3% 7.8% 1.7% -2.8% 8.2% 3.4%Sector Allocation -0.4 0.5 0.8 -0.6 -1.2 1.5 1.7 -1.5 6.0 0.7Commodity Selection 0.5 1.7 2.9 1.3 -2.9 1.2 -1.6 1.4 2.9 0.9Contract Selection 1.3 -0.6 1.6 2.8 5.4 5.1 1.7 -2.7 -0.7 1.8
Total Impact from Cash 0.3 -0.1 0.8 -2.3 -5.2 0.0 -0.4 1.3 -0.2 -0.8
Total Portfolio Alpha 1.7 1.5 6.1 1.2 -3.9 7.8 1.2 -1.5 8.1 2.6
*Partial period from 1 July through 31 December 2003 | **Since inception of initial representative actively managed commodities account on 1 July 2003. | Gross performance results are net of commissions and other direct expenses, but before (gross of) advisory fees, custody charges, withholding taxes, and other indirect expenses, and include reinvestment of dividends. If all expenses were reflected, the performance shown would be lower. Actual fees will vary depending on, among other things, the applicable fee schedule and account size. For example, if US$100,000 was invested and experienced a 10% annual return compounded monthly for ten years, its ending value, without giving effect to the deduction of advisory fees, would be US$270,704 with an annualized compounded return of 10.47%. If an advisory fee of 0.95% of average net assets per year were deducted monthly for the ten-year period, the annualized compounded return would be 9.43% and the ending dollar value would be US$246,355. Information regarding the firm’s advisory fees is available upon request. Composite returns have the potential to be adjusted until reviewed and finalized 30 days following each calendar quarter end period. Past performance is no guarantee of future results. For use in one-on-one presentations only. This supplemental information complements the GIPS® compliant presentation provided in the attachment. | Portfolio attribution is calculated based on the prevailing representative account back to inception which was selected by the firm because it was deemed to best represent this investment approach. The representative account changed over time due to changing availability of accounts and due to a shift in the strategic used to manage the underlying cash collateral. Results for other advisory accounts may vary from the information shown. Attribution results reflect the difference between the account’s Total Return and the Total Return of the custom Equal Sector-Weighted S&P GSCI.
20
Appendix
CommoditiesCommingled Account Investment Management Fee Schedule
Commingled pool account fees consist of two components: 1) an investment management fee and 2) routine operating expenses (e.g., custody, accounting, audit, transfer agency, and other administrative expenses). Operating expenses are capped, separate from, and in addition to the investment management fee.
2000003556/331195_0/G1298/G1298
| Fee changes are not anticipated at this time, but could occur in the future.
Annual Management Fee
On all assets 0.75%
Minimum Account Size Minimum Annual Fee
Commingled account US$5 million US$37,500
21
Commodities PortfolioWhat Differentiates Our Active Commodities Strategy
Appendix
Commitment to the natural resources area
Experienced fundamental research team
Diversified strategic benchmark
Broad commodity opportunity set
Guidelines and risk controls
2000003464/331195_0/G1298/G1298
22
Appendix
CommoditiesKey Considerations
The portfolio managers emphasize bottom-up, fundamental research across commodities and commodity sectors. Exposures by sector, commodity, tenor/maturity, and contract can vary. Exposure to longer-dated contracts can result in meaningful performance differentials relative to the spot or near-dated contracts often used in benchmarks.
Exposure may be concentrated in a relatively small number of commodities across the four commodity sectors.
The portfolio uses derivatives to gain the majority of its exposures, inclusive of futures, options, swaps, and other instruments. Derivatives can be volatile and involve various degrees of risk. The value of derivative instruments may be affected by changes in overall market movements, the business or financial condition of specific companies, index volatility, changes in interest rates, or factors affecting a particular industry or region. Other relevant risks includes the possible default of the counterparty to the transaction and the potential liquidity risk with respect to particular derivative instruments.
The portfolio cannot be net short any single commodity in aggregate, but can hold short positions in individual contracts for a given commodity.
Gross exposure, defined as the sum of all long positions plus the sum of the absolute value of all short positions, may exceed 100% of the market value of the portfolio.
The portfolio can hold positions in commodities and contracts that are not components of the portfolio’s underlying benchmark.
The portfolio’s derivative positions are fully collateralized. Collateral is managed by Wellington Management’s Fixed Income team utilizing a strategy that focuses primarily on short duration US Treasury and Agency securities as well as repurchase agreements collateralized by cash items or US government securities.
For more information regarding the eligible investments and portfolio guidelines, please refer to the portfolio’s Statement of Characteristics.
2000362485/331195_0/G1298/G1298
23
W E L L I N G T O N M A N A G E M E N T
3
CommoditiesWhy Active Management?
Appendix
Opportunity set is characterized by high volatility and low correlations
Strong research depth can drive differentiated returns
Access to full futures curve and out-of-benchmark investments offers alpha opportunities
Investment opportunities created by market inefficiencies•
2000003592/331195_0/G1298/G1298
Non-economic players (commercial hedgers)• Institutional investments primarily passive
Predominance of momentum traders creates opportunities for fundamental investors
Appendix
A1
Appendix
CommoditiesThree Sources of Active Management
Commodity Selection•50
2000407420/331195_0/G2255/G2255
Commodities•Resultofbottom-upfundamentalanalysisofsupply,demand,productioncosts,anddemandelasticity
•Netshortingprohibitedandmaximumexposurelimitedbyriskcontributionandliquidity
•Alsoinfluencedbycurveshape
ContractSelection•Maturitycanrangefrom1monthto10years•Curvepositioningdependentonrollyieldandcyclicalposture•Alsoincludeschoiceofinstrumentandcommoditytype
SectorAllocation•±15%relativetobenchmarkweight•Drivenbybottom-upopportunitiesaswellascycleviews
Appendix
A2
Appendix
Commodities Market OutlookCurrent Focus
As of October 2012
We favor commodities where capacity is tight and demand is accelerating
In contrast, we are biased against commodities where prices are stimulating supply growth or where spare capacity remains high
2000388033/331195_0/G1298/G1298
EnergyIndustrial Metals
Precious Metals Agriculture & Livestock Total
Petroleum Gas Coal Grains Softs Livestock
Fundamentals Current + 0 – 0 ++ +++ – – – +Trend ^ b ^ b ^ b c c b
Valuation Current – ++ + + – – – – + ++ – Trend ^ c c c c c ^ b c
Sentiment Current – – – + + 0 – – – ++ ++ – – Trend c ^ ^ c c c b b c
Roll Yield Current + – – – – + 0 +++ – – – – – +Trend ^ b ^ ^ ^ b c c b
Appendix
A3
Appendix
Commodities MarketCommodity Valuations and Fundamental Tightness
2000332069/331195_0/G2255/G2255
9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99 9/00 9/01 9/02 9/03 9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12253035404550556065707580859095
100105110115120125130135140145150155160
80
75
70
65
60
55
50
45
40
35
30
25
Pric
e as
% o
f Mar
gina
l Cos
t
Tightness Index
P/MC (LHS) Tightness (RHS)
Sources: USDA, DOE, IEA, LME, Bloomberg, Macquarie, Brean Murray, BP, Bernstein | The Tightness Index ranks 15 commodities based on inventory or spare capacity. A low ranking indicates tight inventory and spare capacity levels; a high number indicates ample inventories and spare capacity.
High Price to Marginal Cost/Low Inventories
Low Price to Marginal Cost/High Inventories
Appendix
A4
2000416218/331195_0/G2255/G2255
3/93 5/95 7/97 9/99 11/01 1/04 3/06 5/08 7/10 9/1240
60
80
100
120
140
160
180
Pric
e as
% M
argi
nal C
ost
3/93 5/95 7/97 9/99 11/01 1/04 3/06 5/08 7/10 9/1250
75
100
125
150
175
200
225
250
Pric
e as
% M
argi
nal C
ost
3/93 5/95 7/97 9/99 11/01 1/04 3/06 5/08 7/10 9/1250
70
90
110
130
150
170
Pric
e as
% M
argi
nal C
ost
3/93 5/95 7/97 9/99 11/01 1/04 3/06 5/08 7/10 9/1250
70
90
110
130
150
170
190
Pric
e as
% M
argi
nal C
ost
Source: CFTC, Haver Analytics, Wellington Management Company, llp | Price to Marginal Cost (P/MC) is a proprietary framework used at Wellington Management
Appendix
Commodity SectorsPrice to Marginal Cost
Energy
Precious Metals
Industrial Metals
Agriculture
Appendix
A5
Appendix
Commodities MarketFundamental Tightness Across Commodities
2000332072/331195_0/G2255/G2255
J J
JJ
B
B
B
H
HH
H
F
F
PP
PP
PP
PP
P
PPP
P
P
0
20
40
60
80
100
120
140
160
180
200
0 10 20 30 40 50 60 70 80 90 100
Pric
e as
a %
of M
argi
nal C
ost
Inventory or Spare Capacity (% of Maximum)
OPEC Spare Oil OECD
US Gasoline
US Distillates
US Gas
US Coal
UK Gas
Alum
Copper
Nickel Zinc
Cattle
Hogs
All Grains US Grains
World Wheat US Wheat
World Corn
US Corn
World Beans
US Beans
World Rice World Cotton US Cotton Sugar
Cocoa
Coffee
Tighter Inventory/Spare Capacity
Higher Inventory/Spare Capacity
Sources: USDA, DOE, IEA, LME, Bloomberg, Macquarie, BreanMurray, BP, Bernstein | As of October 2012
Appendix
A6
Appendix
Commodity Prices Dispersed Throughout Price Triggers
2000416219/331195_0/G2255/G2255
Sugar
5. Consumers look for ways to conserve or substitute
Time
Com
mod
ity P
rice
6. New capacity enters into Production
1. Projects get cancelled or postponed
2. Unprofitable capacity is closed down
4. Projects are commissioned
3. Idled capacity comes back into operation
Marginal Cost of Existing Capacity
Marginal Cost of New Production
Demand Rationing Trigger Wheat
Zinc
Alum
Gold
Copper
Silver
PGMs
WTI
Cocoa
Coffee
Nickel
Corn
Cotton
Lumber
Beans
Coal
Hogs
Cattle
GasPower
Source: Wellington Management, as of October 2012. | For illustrative purposes only. Not representative of an actual investment.
Uranium
Distillate
Ethanol
Gasoline
= Energy
= Industrial Metals
= Precious Metals
= Agriculture
= Livestock
= Other
Iron Ore
Brent
Appendix
A7
Appendix
Commodities MarketSentiment Indicator
Sources: CFTC, Haver Analytics
2000416220/331195_0/G2255/G2255
| As of September 2012
4/91 8/92 12/93 4/95 8/96 12/97 4/99 8/00 12/01 5/03 9/04 1/06 5/07 9/08 1/10 5/11 9/12-15
-10
-5
0
5
10
15
20
25
30
Percen
t
Net Long/Short as Percentage of Open Interest
Appendix
A8
Appendix
Commodities MarketCommodity Futures Curves
As of 30 September 2012
2000366812/331195_0/G1298/G1298
| Source: Bloomberg
12/12 6/13 12/13 6/14 12/14 6/15 12/15 6/16 12/16 6/17 12/17 12/2080
90
100
110
120Brent Sep 2012 WTI Sep 2012
11/11 11/12 11/13 11/14 11/15 11/16 11/17 11/18 11/19 11/20 11/21 11/22 11/23 11/240
2
4
6
8
10
Sep 2012 Jun 2012 Dec 2011 Sep 2011
3/12 7/12 12/12 5/13 9/13 3/14 7/14 12/14 12/15300
400
500
600
700
800
Sep 2012 Jun 2012 Dec 2011 Sep 2011
Crude Oil (Dollar/Barrel)
Natural Gas (Dollar/MMBTU)
Corn (Cents/Bushel)
Appendix
A9
Data as of 30 September 2012
2000451514/331195_0/G1298/G1298
| Source: Wellington Management Company.
Appendix
Implied Roll Yields Across Commodities
Natural Gas
Lumber
Newcastle Coal
Palm Oil
Live Cattle
RiceCoffee
Propane
Soybean Oil
CottonAluminium
ZincKansas W
heat
Robusta
SugarCocoa
CornCAPP Coal
Orange Juice
Nickel
SilverPalladium
Soybeans
GoldCopper
Platinum
Uranium
Rhodium
Freight
Iron Ore
Alumina
Cinergy Off-Peak
Feeder Cattle
Ethanol
LeadW
heat
European Wheat
Heating Oil
Gasoil
Brent Oil
Lean Hogs
Unleaded Gas
Ethane
-40
-20
0
20
40
60
80
Annu
alize
d Ro
ll Yi
eld
(%)
Annualized Roll Yield
AppendixAppendixAppendixAppendixAppendixAppendixAppendix
A10
AppendixAppendixAppendixAppendixAppendixAppendix
Appendix
Short-Term Government ApproachInvestment Guidelines
The above characteristics are sought during the portfolio management process. Actual experience may not reflect all of these characteristics, or may be outside of stated ranges.
Interest rate risk•Duration
2000325379/331195_0/G1298/G1298
range:0–60days•Maximummaturitypersecurity:397days
Credit risk•A1/P1individualminimum•5%maximuminilliquidsecurities(repomaturinginmorethan7days)
Eligibleinvestments•USTreasuriesandAgencies•RepurchaseAgreements
Appendix
A11
Appendix
Short-Term GovernmentPortfolio Characteristics – Third Quarter 2012
2000328198/331195_0/G1099/G1099
30 June 2012 | Information shown is for a representative account which was selected by the firm because it was deemed to best represent this investment approach. Results for other advisory accounts may vary from the information shown. This supplemental information complements the GIPS® compliant presentation for the Short-Term Cash Composite which is provided in the attachment.
WMC Portfolio
Agencies 30%
Treasuries 8
WMC Portfolio
Overnight Repo 20%
Term Repo 42
WMC 1-Month Portfolio Treasury Bill Comments
Yield 0.22% 0.00% Attractive yieldAverage Maturity 57 days 30 days Liquid
Appendix
A12
Appendix
Commodities PortfolioCommodities Team Biographies
David A. Chang, CFASenior Vice PresidentCommodities Portfolio Manager11 years of professional experience, 11 years with Wellington
2000456742/331195_0/329782/G1298
ManagementBA, Tufts University, 2001
Gregory J. LeBlanc, CFADirectorGlobal Industry Analyst20 years of professional experience, 17 years with Wellington ManagementBA, Bates College, 1992
David R. Fassnacht, CFASenior Vice PresidentEquity Portfolio Manager24 years of professional experience, 21 years with Wellington ManagementBS, University of Pennsylvania (Wharton), 1988
Greg GarabedianVice PresidentEquity Research Analyst13 years of professional experience, 6 years with Wellington ManagementBS, Villanova University, 1997MBA, University of Pennsylvania (Wharton), 2005
Gabriel A. Kim, CFAVice PresidentEquity Research Analyst15 years of professional experience, 5 years with Wellington ManagementBASc, University of Pennsylvania (Wharton), 1996BS, University of Pennsylvania (Wharton), 1996MBA, University of Pennsylvania (Wharton), 2004
Sabre S. MayhughVice PresidentCommodities Research Analyst19 years of professional experience, 8 years with Wellington ManagementAB, Harvard College, 1992
Appendix
A13
Appendix
Commodities PortfolioCommodities Team Biographies (continued)
Karl E. BandtelSenior Vice PresidentEquity Portfolio Manager22 years of professional experience, 22 years with Wellington
2000452866/331195_0/G1298/G1298
ManagementBS, University of Wisconsin (Madison), 1988MS, University of Wisconsin (Madison), 1990
Jay BhutaniDirectorGlobal Industry Analyst25 years of professional experience, 5 years with Wellington ManagementBS, University of Pennsylvania, 1985MBA, Carnegie-Mellon University, 1991
Victor Cherian, CFADirectorGlobal Industry Analyst14 years of professional experience, 1 year with Wellington ManagementBEng, University of Mumbai, 1997MBA, Indian Institute of Management, 2000
Eugene KhmelnikAssistant Vice PresidentEquity Research Analyst4 years of professional experience, 4 years with Wellington ManagementBBA, University of Wisconsin (Madison), 2008
Bill OgrodnickVice PresidentGlobal Industry Analyst10 years of professional experience, 5 years with Wellington ManagementBS, University of Pennsylvania (Wharton), 2001MBA, University of Pennsylvania (Wharton), 2007
Mark N. Viviano, CFAVice PresidentGlobal Industry Analyst13 years of professional experience, 10 years with Wellington ManagementBA, Hamilton College, 1999MS, Boston University, 2004
George A. von MetzschResearch Associate3 years of professional experience, 1 year with Wellington ManagementBA, Hamilton College, 2009
Appendix
A14
Appendix
Commodities PortfolioCommodities Team Biographies (continued)
Andrew ChangAssociate DirectorGlobal Industry Analyst6 years of professional experience, 2 years with Wellington
2000452894/331195_0/G1298/G1298
ManagementBA, Dartmouth College, 2005MBA, University of Pennsylvania (Wharton), 2010
John C. O’Toole, CFASenior Vice PresidentGlobal Industry Analyst24 years of professional experience, 20 years with Wellington ManagementBS, Bentley College, 1988
Manuel R. SotoResearch Associate4 years of professional experience, 4 years with Wellington ManagementBS, Massachusetts Institute of Technology, 2008
Keith E. WhiteVice PresidentGlobal Industry Analyst10 years of professional experience, 5 years with Wellington ManagementBS, James Madison University, 2001MBA, Dartmouth College (Tuck), 2007
Mark J. BeckwithSenior Vice PresidentGlobal Industry Analyst32 years of professional experience, 17 years with Wellington ManagementBS, Fairfield University, 1980MS, Stanford University, 1981
Alan HsuVice PresidentGlobal Industry Analyst11 years of professional experience, 4 years with Wellington ManagementBBA, University of Texas (Austin), 2000MBA, Dartmouth College (Tuck), 2008
Tom LeveringSenior Vice PresidentGlobal Industry Analyst19 years of professional experience, 12 years with Wellington ManagementAB, Harvard College, 1993MBA, University of Pennsylvania (Wharton), 1997
Appendix
A15
Appendix
Commodities PortfolioCommodities Team Biographies (continued)
Juanjuan Shen, CFAAssistant Vice PresidentGlobal Industry Analyst17 years of professional experience, 6 years with Wellington
2000452902/331195_0/G1298/G1298
ManagementBA, Wellesley College, 2004
Robert F. Hayes III, CFAVice PresidentGlobal Industry Analyst17 years of professional experience, 12 years with Wellington ManagementBA, Trinity College, 1992MBA, University of Rochester, 1996
Chris AveryDirectorGlobal Industry Analyst31 years of professional experience, 4 years with Wellington ManagementBA, University of Portsmouth, 1981
William L. Wrightson III, CFASenior Vice PresidentGlobal Industry Analyst22 years of professional experience, 14 years with Wellington ManagementBA, Princeton University, 1988
Suzanne L. StefanyVice PresidentGlobal Industry Analyst24 years of professional experience, 10 years with Wellington ManagementBA, Tufts University, 1986MS, Massachusetts Institute of Technology (Sloan), 1992
A16
Appendix
Appendix
Important Notice
Wellington Management Company, llp is an independently owned, SEC-registered Investment Adviser that, along with its subsidiaries and affiliates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, Wellington Management also has offices in: Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Singapore; Sydney; and Tokyo. This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management Company, llp or its affiliates. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up
2000000298/331195_0/G1422/G1422
-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.
In the UK, this material is provided by Wellington Management International Limited (WMIL), a firm authorized and regulated by the Financial Services Authority (FSA). This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the rules of the FSA. This material must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment service to which this material relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. WMIL is also registered as an investment adviser with the US Securities and Exchange Commission. In Germany, this material is provided by Wellington Management International Limited, Niederlassung Deutschland, the German branch of Wellington Management International Limited, which is authorized and regulated by the FSA and in respect of certain of its activities by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). This material is directed only at persons (Relevant Persons) who are classified as eligible counterparties or professional clients under the German Securities Trading Act. This material must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment service to which this material relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This material does not constitute financial analysis within the meaning of Section 34b of the German Securities Trading Act, does not meet all legal requirements designed to guarantee the independence of financial analyses, and is not subject to any prohibition on dealing ahead of the publication of financial analyses. This material does not constitute a prospectus for the purposes of the German Investment Fund Act, the German Securities Sales Prospectus Act or the German Securities Prospectus Act. In Hong Kong, this material is provided to you by Wellington Global Investment Management Limited (WGIM), a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities), Type 4 (advising on securities), and Type 9 (asset management) regulated activities, on the basis that you are a Professional Investor as defined in the Securities and Futures Ordinance. By accepting this material you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. WGIM is also registered as an investment adviser with the US Securities and Exchange Commission. In Singapore, this material is provided for your use only by Wellington International Management Company Pte Ltd (WIM) (Registration Number 199504987R), regulated by the Monetary Authority of Singapore with a Capital Markets Services Licence to conduct fund management activities. By accepting this material you represent that you are a non-retail investor and that you will not copy, distribute or otherwise make this material available to any person. WIM is also registered as an investment adviser with the US Securities and Exchange Commission. In Australia, Wellington International Management Company Pte Ltd (WIM) has authorized the issue of this material for use solely by wholesale clients (as defined in the Corporations Act 2001). By accepting this material, you acknowledge and agree that this material is provided for your use only and that you will not distribute or otherwise make this material available to any person. Wellington Management Company, llp is exempt from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 in respect of financial services, in reliance on class order 03/1100, a copy of which may be obtained at the web site of the Australian Securities and Investments Commission, http://www.asic.gov.au. The class order exempts a registered investment adviser regulated by the SEC, among others, from the need to hold an AFSL for financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Wellington Management Company, llp are regulated by the SEC under the laws and regulatory requirements of the United States, which are different from the laws applying in Australia. In Japan, Wellington International Management Company Pte Ltd has been registered as a Financial Instruments Firm with registered number: Director General of Kanto Local Finance Bureau (Kin-Sho) Number 428. WIM is a member of the Japan Investment Advisers Association (JIAA) and the Investment Trusts Association, Japan (ITA).
©2013 Wellington Management. All rights reserved. | As of January 2013
Appendix
CommoditiesInvestment Risks
Principal RisksCommodities Risks – Exposure to the commodities markets may be more volatile than investments in traditional equity or fixed income securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, interest rate changes or events affecting a particular commodity or industry.
Concentration Risk – Concentration of investments in a relatively small number of securities, sectors or industries, or geographical regions may significantly affect performance.
Manager Risk – Investment performance depends on the portfolio management team and the team’s investment strategies. If the investment strategies do not perform as expected, if opportunities to implement those strategies do not arise, or if the team does not implement its investment strategies successfully, an investment portfolio may underperform or suffer significant losses.
Risks of Derivative Instruments – Derivatives can be volatile and involve various degrees of risk. The value of derivative instruments may be affected by changes in overall market movements, the business or financial condition of specific companies, index volatility, changes in interest rates, or factors affecting a particular industry or region. Other relevant risks include the possible default of the counterparty to the transaction and the potential liquidity risk with respect to particular derivative instruments. Moreover, because many derivative instruments provide significantly more market exposure than the money paid or deposited when the transaction is entered into, a relatively small adverse market movement can not only result in the loss of the entire investment, but may also expose a portfolio to the possibility of a loss exceeding the original amount invested.
Additional RisksCredit Risk – The value of fixed income security may decline, or the issuer or guarantor of that security may fail to pay interest or principal when due, as a result of adverse changes to the issuer’s or guarantor’s financial status and/or business. In general, lower-rated securities carry a greater degree of credit risk than higher-rated securities.
Currency Risk – Investments in currencies, currency futures contracts, forward currency exchange contracts or similar instruments, as well as in securities that are denominated in foreign currency, are subject to the risk that the value of a particular currency will change in relation to one or more other currencies.
Fixed Income Securities Market Risks – Fixed income securities markets are subject to many factors, including economic conditions, government regulations, market sentiment, and local and international political events. In addition, the market value of fixed income securities will fluctuate in response to changes in interest rates, currency values, and the creditworthiness of the issuer.
Foreign Market Risks (includes Emerging Markets) – Investments in foreign markets may present risks not typically associated with domestic markets. These risks may include changes in currency exchange rates; less-liquid markets and less available information; less government supervision of exchanges, brokers, and issuers; increased social, economic, and political uncertainty; and greater price volatility. These risks may be greater in emerging markets, which may also entail different risks from developed markets.
Interest Rate Risk – Generally, the value of fixed income securities will change inversely with changes in interest rates. The risk that changes in interest rates will adversely affect investments will be greater for longer-term fixed income securities than for shorter-term fixed income securities.
Issuer Specific Risk – A security issued by a particular issuer may be impacted by factors that are unique to that issuer and thus may cause that security’s return to differ from that of the market.
Leverage Risk – Use of leverage exposes the portfolio to a higher degree of additional risk, including (i) greater losses from investments than would otherwise have been the case had leverage not been used to make the investments, (ii) margin calls that may force premature liquidations of investment positions.
Liquidity Risk – Investments with low liquidity can have significant changes in market value, and there is no guarantee that these securities could be sold at fair value.
Prepayment Risk – Pass-through instruments such as mortgage-related and asset-backed securities are subject to prepayment risk, which is the possibility that the principal of the loans underlying the securi-ties may be prepaid at any time. Because of prepayment risk, the total return and maturity of asset-backed securities may be difficult to predict.
Repo & Reverse Repo Risks – Both repurchase and reverse repurchase transactions involve counterparty risk. A reverse repurchase transaction also involves the risk that the market value of the securities the investor is obligated to repurchase may decline below the repurchase price.
2000348199/331195_0/G1298/G1298
2000041175/331195_0/G2332/G2308
Wellington Management Composite: Commodities - Equal Sector-Weighted - Conservative Collateral Schedule of Performance Returns from 01 January 2008 to 31 December 2011
COMMODT2TOT Generated on: 15 June 2012
Period GrossReturn (%)
NetReturn (%)
Benchmark Return (%)
Number of Accounts
Internal Dispersion (%)
Composite Mkt. Value (USD Mil)
Total Firm Assets (USD Mil)
2008 1 -27.07 -27.63 -30.97 N/M N/M 574 419,641 2009 33.92 32.94 27.91 9 0.7 3,461 537,384 2010 22.76 21.86 21.35 12 0.2 5,817 633,922 2011 -4.00 -4.72 -5.71 13 0.3 5,818 651,496
Benchmark: S&P GSCI Commodity Equal Sector Wght
1 Returns reflect performance beginning 01 January 2008. N/M: For years where there are five or fewer accounts throughout the performance period, Internal Dispersion and Number of Accounts are not meaningful. Composite Description: Accounts included in the Commodities - Equal Sector-Weighted - Conservative Collateral Composite seeks to outperform an equal sector-weighted S&P Goldman Sachs Commodity Index and to serve as a hedge against rising inflation. Individual commodity exposures and sector allocations are actively managed. The collateral is managed conservatively, and seeks to preserve principal and liquidity by investing in short-term securities within guidelines that maintain a low average days-to-maturity for the underlying collateral portfolio. Composite Creation Date: The composite creation date is March 2009. Composite Membership: All fully discretionary, fee paying accounts are eligible for inclusion in the composite. Fee Schedule: The US institutional management fee schedule for this product is: Market Value Annual FeeOn all assets 0.75% Benchmark Description: The S&P GSCI Commodity Equal Sector-Weight benchmark is an equal sector-weighted version of the production-weighted S&P Goldman Sachs Commodity Index, where we have weighted four sectors equally: Energy, Precious Metals, Industrial Metals, and Agriculture & Livestock. The benchmark's component weights are rebalanced quarterly. Derivatives: Derivatives will be used to achieve exposure to the commodities markets. The primary instruments used will be individual commodity and commodity index futures, although options, options on futures, swaps, structured notes, exchange-tradedfunds, and other derivatives and securities may be used. Typically, 90 to 100% of the cash value of the Portfolio will provide exposure to commodities. This exposure will be fully collateralized, through a combination of short-term fixed income securities held as margin and investment in a conservative cash management approach. Firm: For purposes of GIPS® compliance, the Firm is defined as all accounts managed by Wellington Management Company, LLP, an independently owned, SEC-registered investment adviser which, along with its subsidiaries and affiliates (collectively, Wellington Management), provides investment advisory services to institutions around the world. Located in Boston, Massachusetts, WellingtonManagement also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Singapore; Sydney; and Tokyo. GIPS®: Wellington Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS® standards. Wellington Management has been independently verified for the periods 1 January 1993 to 31 December 2010. The verification report is available upon request. Verification assesses whether (1) the
firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite presentation. Performance Calculation: Gross performance results are net of trading expenses. Net performance returns are net of a model investment management fee and are calculated by subtracting 1/12th of the highest applicable fee on a monthly basis from the composite gross returns. Returns, market values, and assets are reported in USD except when otherwise noted. Returns, market values and assets reported in currencies other than USD are calculated by converting the USD monthly return and assets using theappropriate exchange rate (official 4:00 p.m. London closing spot rates). Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Internal Dispersion: The dispersion measure presented is the asset-weighted standard deviation. The asset-weighted standard deviation measures the dispersion of individual account returns relative to the asset-weighted composite return. Only accounts that have been included in the composite for the full period are included in the standard deviation calculation. Limitations imposed by client guidelines or by law on an account's ability to invest in certain securities or instruments, such as IPO securities, and/or implementation of the firm's Trade Allocation Policies and Procedures, may cause the account's performance to differ from that of the composite. External Dispersion: The dispersion measure presented is the three-year annualized ex-post standard deviation. It measures the variability of the composite and the benchmark(s) over the preceding 36-month period. For periods prior to 1 January 2011, the Firm was not required to present the standard deviation.
3-Year Standard Deviation (%) Year Composite Benchmark 2011 16.91 17.54
Composite Listing: Wellington Management's list of composite descriptions is available upon request. Other Matters: This material contains summary information regarding the investment approach described herein and is not a complete description of the investment objectives, policies, guidelines, or portfolio management and research that supports thisinvestment approach. Any decision to engage Wellington Management should be based upon a review of the terms of the investment management agreement and the specific investment objectives, policies, and guidelines that apply under the terms of such agreement. Past Performance: Past performance is no guarantee of future results.
2000315457/331195_0/G2334/G2334
Wellington Management Composite: Short-Term Cash Broad Schedule of Performance Returns from 01 January 2002 to 31 December 2011
MMKTBROADTOT Generated on: 28 March 2012
PeriodGross
Return (%) Net
Return (%) Benchmark Return (%)
Number of Accounts
Internal Dispersion (%)
Composite Mkt. Value (USD Mil)
Total Firm Assets (USD Mil)
2002 1.84 1.69 1.78 12 0.0 8,153 302,863 2003 1.20 1.05 1.15 10 0.0 5,338 393,992 2004 1.40 1.25 1.33 10 0.0 5,998 469,884 2005 3.26 3.11 3.07 8 0.0 5,088 520,693 2006 5.13 4.97 4.85 8 0.0 6,296 575,492 2007 5.37 5.22 5.00 7 0.0 4,008 588,376 2008 2.94 2.78 2.06 10 0.0 5,846 419,641 2009 0.45 0.30 0.21 10 0.0 8,319 537,384 2010 0.25 0.10 0.13 11 0.0 10,586 633,922 2011 0.21 0.06 0.05 10 0.0 5,625 651,496
Benchmark: Short-Term Cash Splice
Composite Description: Accounts in the Short-Term Cash Broad composite seek to preserve principal and maintain a high degree of liquidity while providing current income. Average portfolio maturity is generally kept to 60 days or less, with no single investment longer than 13 months. Portfolios emphasize preservation of capital, liquidity, and yield. Accounts represent a broad range of moneymarket approaches, including those governed by SEC Rule 2a-7 and those focused exclusively on government securities.
Composite Creation Date: The composite creation date is April 2010.
Composite Membership: All fully discretionary, fee paying accounts with at least US$10 million in net assets are eligible for inclusion in the composite.
Composite Membership Change: As of May 2011, the account minimum for this composite changed from US$5 million to US$10 million.
Fee Schedule: The US institutional separate account fee schedule for this product is:
Market Value Annual FeeOn the first US$50 million 0.15% On the next US$200 million .075 Over US$250 million .050 Benchmark Description: The benchmark is a splice that consists of the BofA Merrill Lynch 3-Month T-Bill Index from inception through 30 June 2010 and the Barclays Capital 1-Month T-Bill Index from 1 July 2010 to present. The change in benchmark is indicative of a shorter maximum maturity in money market portfolios in sympathy with changes in SEC Rule 2a-7, effective 1 July2010.
Composite Name Change: As of February 2012, the composite name changed from Money Market Broad to Short-Term Cash Broad. The name change has not resulted in any material changes to the style or investment management of this composite or approach.
Firm: For purposes of GIPS® compliance, the Firm is defined as all accounts managed by Wellington Management Company, LLP, an independently owned, SEC-registered investment adviser which, along with its subsidiaries and affiliates (collectively, Wellington Management), provides investment advisory services to institutions around the world. Located in Boston, Massachusetts, WellingtonManagement also has offices in Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Singapore; Sydney; and Tokyo.
GIPS®: Wellington Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS® standards. Wellington Management has been independently verified for the
periods 1 January 1993 to 31 December 2010. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. Verification does not ensure the accuracy of any specific composite presentation.
Performance Calculation: Gross performance results are net of trading expenses. Net performance returns are net of a model investment management fee and are calculated by subtracting 1/12th of the highest applicable fee on a monthly basis from the composite gross returns. Returns, market values, and assets are reported in USD except when otherwise noted. Returns, market values and assets reported in currencies other than USD are calculated by converting the USD monthly return and assets using theappropriate exchange rate (official 4:00 p.m. London closing spot rates). Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
Internal Dispersion: The dispersion measure presented is the asset-weighted standard deviation. The asset-weighted standard deviation measures the dispersion of individual account returns relative to the asset-weighted composite return. Only accounts that have been included in the composite for the full period are included in the standard deviation calculation. Limitations imposed by client guidelines or by law on an account's ability to invest in certain securities or instruments, such as IPO securities, and/or implementation of the firm's Trade Allocation Policies and Procedures, may cause the account's performance to differ from that of the composite.
External Dispersion: The dispersion measure presented is the three-year annualized ex-post standard deviation. It measures the variability of the composite and the benchmark(s) over the preceding 36-month period. For periods prior to 1 January 2011, the Firm was not required to present the standard deviation.
3-Year Standard Deviation (%) Year Composite Benchmark 2011 0.06 0.03
Composite Listing: Wellington Management's list of composite descriptions is available upon request.
Other Matters: This material contains summary information regarding the investment approach described herein and is not a complete description of the investment objectives, policies, guidelines, or portfolio management and research that supports thisinvestment approach. Any decision to engage Wellington Management should be based upon a review of the terms of the investment management agreement and the specific investment objectives, policies, and guidelines that apply under the terms of such agreement.
Past Performance: Past performance is no guarantee of future results.
Commodities Portfolio
QUARTERLY FACT SHEET As of September 30, 2012
Please see back page for important key risks.
PERFORMANCE (%)
Total Returns Net of Fees and Expenses Periods Ended September 30, 2012
YTD 3 Mos 1 Yr 3 Yrs Since Inception Commodities (CTF) 8.11 11.04 11.09 11.80 3.01
Custom Benchmark 1 7.98 10.43 10.83 10.82 1.41
1 The custom benchmark consists of our Strategic Benchmark, an equal sector-weighted version of the S&P GSCI.
The portfolio’s inception date is December 31, 2007.
Returns for less than one year are not annualized. All performance returns are net of the actual operating expenses, up to the cap, and the highest investment management fee for the periods shown. Performance prior to March 31, 2010 refl ects the highest investment management fee as of March 31, 2010. Please see back page for further information about performance calculations. Past performance is no guarantee of future results.
The cap on operating expenses could be eliminated or revised in the future, which may lower the portfolio’s yield or return.
PORTFOLIO DETAILS
Inception Date Janaury 16, 2008
Assets USD 4,167 million
Investment Management Fee 0.75%
Operating Expense Cap 0.05%
Total Expense Ratio* 0.80%
*Represents the highest investment management fee and maximum operating expense in place as of the date of this fact sheet. Fees and expenses are subject to change.
SECTOR DISTRIBUTION (%)
OVERVIEW
Wellington Trust Company, NA (Wellington Trust) is a national banking association that
provides trust and other fi duciary services. The Commodities Portfolio (the portfolio)
is a common trust fund (CTF) maintained by and available only to trust clients of
Wellington Trust. Wellington Trust has engaged its affi liate, Wellington Management
Company, LLP (Wellington Management) to provide investment advisory services to
the portfolio. Additional information about Wellington Trust’s other trust services is
available upon request.
The Commodities approach seeks to outperform a “Strategic Benchmark,” an equal
sector-weighted version of the S&P Goldman Sachs Commodity Index. Sector alloca-
tions, individual commodity exposures, and contract selection are all actively managed
relative to the Strategic Benchmark. The Commodities approach provides actively
managed exposure to commodities through the use of derivative instruments and
securities, and maintains diversifi ed exposure to the four major commodity sectors:
energy, industrial metals, precious metals, and agriculture and livestock.
The investment approach is based on proprietary bottom-up and top-down fundamen-
tal research. The team incorporates the best ideas of the fi rm’s commodities experts
while assessing appropriate exposures and positioning along the futures curve for
each commodity. Positions are rebalanced based on fundamental views, seasonal
factors, and each commodity’s historical price range. Sector weights are actively
assessed based on the fi rm’s top-down view of the attractiveness of each sector,
which is infl uenced by the fi rm’s outlook for global economic growth, global infl ation,
and major currency relationships, as well as the fi rm’s bottom-up view on each sec-
tor and the roll yield prevailing in each sector. All active positions are viewed in a
contribution-to-risk framework. The portfolio is distinguished by its balanced sector
exposure, incorporation of fundamental research, and moderate turnover of active
positions.
WELLINGTON MANAGEMENT PORTFOLIO MANAGERS
David Chang , CFA Vice President , Commodities Portfolio Manager BA, Tufts University , 2001 11 years of professional experience
Gregory LeBlanc , CFA Senior Vice President , Global Industry Analyst BA, Bates College , 1992 19 years of professional experience
Commodities Strategic Benchmark
0
5
10
15
20
25
30
Energy
Industrial Metals
Precious Metals
Agriculture and Livestock
KEY RISKSConcentration Risk – Concentration of investments in a relatively small number of securities, sectors or industries, or geographical regions may signifi cantly affect performance.
Manager Risk – Investment performance depends on the portfolio management team and the team’s investment strategies. If the investment strategies do not perform as expected, if opportuni-ties to implement those strategies do not arise, or if the team does not implement its investment strategies successfully, an investment portfolio may underperform or suffer signifi cant losses.
Risks of Derivative Instruments – Derivatives can be volatile and involve various degrees of risk. The value of derivative instruments may be affected by changes in overall market movements, the business or fi nancial condition of specifi c companies, index volatility, changes in interest rates, or factors affecting a particular industry or region. Other relevant risks include the possible default of the counterparty to the transaction and the potential liquidity risk with respect to particular derivative instruments. Moreover, because many derivative instruments provide signifi -cantly more market exposure than the money paid or deposited when the transaction is entered into, a relatively small adverse market movement can not only result in the loss of the entire investment, but may also expose a portfolio to the possibility of a loss exceeding the original amount invested.
Commodities Risks – Exposure to the commodities markets may be more volatile than investments in traditional equity or fi xed income securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, interest rate changes or events affecting a particular commodity or industry.
TOP 5 HOLDINGS
Commodity Sector Commodities Strategic Benchmark
Gold Precious Metals 20.5% 21.4%
Crude Oil Energy 15.5 17.4
Copper Industrial Metals 11.7 11.9
Corn Agriculture and Livestock
8.2 6.2
Wheat Agriculture and Livestock
6.1 5.8
Total of Top 5 62.0% 62.7%
PORTFOLIO CHARACTERISTICS
Commodities (CTF) Strategic Benchmark Annualized Volatility (3-Yr) 16.8 17.4
No. of Commodities 25 23
Commodities Portfolio
IMPORTANT DISCLOSURES
Interests in the Portfolio are available only to trust clients of Wellington Trust Company, NA (WTC), a national banking association that provides trust and other fi duciary services. After acceptance of a trust client, an investment in the Portfolio is made at the discretion of WTC only based on an assessment of the trust client’s particular circumstances.
Wellington Management Company, LLP is an independently owned, SEC-registered Investment Adviser that, along with WTC and its other subsidiaries and affi liates (collectively, Wellington Management), provides investment management and investment advisory services to institutions around the world. Located in Boston, Massachusetts, Wellington Management also has offi ces in: Chicago, Illinois; Radnor, Pennsylvania; San Francisco, California; Beijing; Frankfurt; Hong Kong; London; Singapore; Sydney; and Tokyo.
This material is prepared for, and authorized for internal use by, designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. An investment in a common trust fund is made at the discretion of the fund’s trustee only after consideration of a trust client’s particular investment needs and circumstances. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. Past performance is no guarantee of future results. Investments described in this material may not be suitable for certain investors depending upon their investment objective and risk tolerance. Interests in the Portfolio can be highly volatile and subject to the risk of loss.
Interests in the Portfolio may be offered through Wellington Management Advisers, Inc., an SEC-Registered Broker/Dealer, Member FINRA and SIPC. Offi ce of Supervisory Jurisdiction: 280 Congress Street, Boston, MA 02210. Tel: 617-951-5000 Fax: 617-951-5250. Wellington Management Advisers, Inc. is an affi liate of Wellington Management Company, LLP, and Wellington Trust Company, NA.
Not FDIC Insured – No Bank Guarantee – May Lose Value
Net of fee performance refl ects the Portfolio’s actual operating expenses, up to the cap, and the highest investment management fee for the periods shown. Actual fees may vary depending on, among other things, redemptions, portfolio size, and the performance of the fund. Details regarding the total expense ratio of the fund are available upon request. Performance calculations are not adjusted for the effects of taxation, but are adjusted to refl ect all actual ongoing fund expenses and assume reinvestment of dividends and capital gains. The performance experienced by each actual participant may vary signifi cantly.
©2012 Wellington Management Company, LLP. All rights reserved.
WMA2302-1-3